Surowiecki gives numerous examples of where this is true, although fails to highlight perhaps the most accurate predictor of all: the Betfair market. In every sport where the markets are consistently liquid, Betfair proves an amazing long-term predictor of probability. $1.50 shots win about 66 per cent of the time. $2.00 shots win about 50 per cent of the time. $100.00 shots win about one per cent of the time. There are small variations in accuracy, of course, but, given long enough, Betfair’s customers – collectively – get the odds right.

This could put some off betting altogether. After all, if the markets are near-perfect indicators of chance, what’s the point of betting?

The answer, of course, is that whilst the markets are generally accurate when taken as a collective over a long period, they are significantly less accurate when it comes to any individual market. Successful punters can identify these markets and exploit the short-term variation.

Nonetheless, the long-term prescience of Betfair markets should be sobering. When betting, we are taking on a large collective of other individuals, and we need to be confident that our selection methods and staking strategies are good enough to outperform most of them.

Unfortunately, our psychology is typically not helpful in this regard. Rather than being necessarily humble and tentative when faced with the multitude of other punters who populate a Betfair market, the average punter will be overconfident, believing their predictions to be better than others: even where there is no good reason to believe this to be the case.

In a 1981 study by Ola Svenson, 161 drivers, from Sweden and the US, were asked to judge their driving competence in two areas: their level of skill and their level of safety. Overwhelmingly, drivers rated themselves as being more skilful and less risky than the median, with around half of subjects believing themselves to be in the top 20 per cent in both areas.

The results of Svenson’s study have been replicated in numerous other experiments.

Data combined from various studies shows that, when we express we are 100 per cent certain of an outcome, we are likely to be wrong around 20 per cent of the time.

And whether it is our performance in spelling tests, our capacity to estimate the likely answers to general knowledge questions, our ability to teach others, or our chances of being a successful entrepreneur, humans consistently believe they will significantly outperform the median. Most amusingly, according to Nicholas Taleb (of Black Swan fame), 84 per cent of Frenchmen believe themselves to be better-than-average lovers.

Psychologists explain superstition by suggesting that humans have a desire to control stressful and unpredictable events.

Jack Houghton

ILLUSION OF CONTROL

What we know for certain, of course, is that 50 per cent of people will fall below any median, and 50 per cent above. What makes most us so certain, then, that we are in the better half of that median?

By now, any punter reading this should be worried. After all, if we have an innate bias towards overconfidence, and yet face a market which is predictively reliable in the long-run, the likelihood is that most punters are going to lose money across the course of their punting life. And, of course, most do.

Especially concerning is that some studies have shown that humans have an in-built belief that more desirable outcomes are also more likely. Assuming that all punters bet because they like the idea of winning more money, this tells us that, when betting, we will be even more susceptible to overconfidence.

As with all the cognitive biases explored in this series, the crucial first step in overcoming it is to recognise it. Once we accept that we are most likely average punters, at best, then we are much more likely to be able to take the necessary steps to make ourselves better-than-average punters.

Then we need to identify the ways to make ourselves better. This site contains copious amounts of sage advice about improving selection methods and staking strategies. Take the time to develop and test these approaches, only committing money when you have empirical evidence that your way of doing things is better-than-average.

Lastly, detach yourself from the emotion of what you are betting on. We all develop attachments to certain horses, players, and teams, but our desire for their success doesn’t make it any more likely.

In the meantime, don’t ask your partner how good a love-maker you are. Whatever they may say, average is probably closer to the truth. The good news is that we can all get better at everything. With the right practice, of course.

About The Author – Jack Houghton

As a passionate sports’ fan and punter, Jack has written about sports and betting for over a decade, winning the Martin Wills Award for racing journalism in 2002 and writing Winning on Betfair for Dummies, first published in 2006 and now in its second edition, having sold over 35,000 copies in two languages.

Related Articles

Loss Aversion

When it comes to the psychology of betting, a lot of focus is given to how we stop ourselves ...